Monday Night Betting Card From Analytics Capper + Deep Dive: Explaining MLS Clubs' Skyhigh Valuations
Inside: NFL Week 9 Recap, Next Week's Schedule, and Best Articles of the Week
Happy Monday, everyone.
I attended UFC 268 over the weekend and will send out a podcast breaking down the fights on Wednesday. For today’s edition, I wrote about MLS franchises’ high team valuations. As always, thanks to Analytics Capper for providing his picks; if you enjoy his column, follow him on Twitter.
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Table of Contents:
What I Watched Last Week
Gambling With Analytics Capper
Deep Dive: Explaining MLS Clubs' Skyhigh Valuations
What I Am Watching This Week
What I am Reading
What I Watched Last Week
A massive bounce-back performance from Justin Herbert
Baker Mayfield (and the Browns offense) looked much more cohesive without Odell Beckham Jr
I was surprised to see Jordan Love bested Patrick Mahomes in their match-up
Sam Darnold is tied for the league-lead in interceptions (11) while boasting the league’s worst passer rating (71.3). And yes, the Panthers owe Darnold a fully-guaranteed $18.8 million in 2022 after exercising his fifth-year option in the offseason
On a side note, I usually reserve judgment on a draft class until three years pass. I will make an exception for the Raiders 2020 draft haul:
Yikes.
Gambling With Analytics Capper
Last Week’s NFL & NHL & NBA
Teaser (-120) 2u: Giants +17 & Giants/Chiefs Over 45.5 ❌
Pacers -3 (-110) v. Spurs 2u ✅
Celtics -2.5 (-105) v. Bulls 2u ❌
Blazers/76ers Under 220 2u ✅
Magic/Timberwolves Under 216 2u ✅
Nuggets/Grizzlies Under 213.5 2u ✅
Thunder/Clippers Under 210.5 2u ✅
Blackhawks (-135) v. Senators 3u ✅
Oilers ML (-225) v. Kraken 2u ✅
Cavaliers/Hornets Under 220 ❌
Spurs/Pacers Under 216.5 ❌
Bulls/Celtics Under 215.5 ❌
Wizards/Hawks Under 223 ❌
Raptors/Knicks Under 208.5 ❌
Week Tally: 8-6 (↓ .25 units)
Season Tally: 19-11 (↑ 6.06 units)
Here’s what AC has for tonight:
NFL & NHL & NBA
Steelers -7 (-105) v. Bears 2u
Leafs ML (-250) v. Kings 1u
Nets v. Bulls over 216 (-110) 3u
Mavericks -8.5 (-105) v. Pelicans 1u
1H Heat v. Nuggets under 104 (-110) 2u
Kings +3 (-105) v. Suns 2u
Kings v. Suns over 226 (-105) 3u
** The Lukas Review is not an online gambling operator nor a gambling site of any kind. I provide information about sports betting for entertainment purposes only. Although I talk about betting in the newsletter, it is the responsibility of all visitors to check current local laws in their own area or country before doing any gambling online. It is your responsibility to know and follow your local laws in place.**
Deep Dive: Explaining MLS Clubs' Skyhigh Valuations
The MLS has experienced rapid growth over the past few years — leading to high team valuations. Despite a drastic drop-off in play quality from the Premier League to the MLS, the latter is worth higher sums. The average MLS franchise is worth more than every EPL club outside the Big Six. For reference, the average MLS team is worth $550 million, with Los Angeles FC atop the list at $860 million. The difference in team valuations derives from a lack of promotion/relegation, immense growth possibilities, and ownership of Soccer United Marketing.
The MLS was birthed out of the United States’ bid to obtain the hosting rights for the 1994 World Cup. The league struggled to attract fans and bled cash: “Major League Soccer lost an estimated $250 million during its first five years, and lost more than $350 million between its founding and the year 2004.”1 In attempts to attract viewership, the league poached European stars at the twilight of their careers. From a Lukas Review in August:
The old MLS model was broken. Players like Andrea Pirlo, Frank Lampard, Steven Gerrard, Bastian Schweinsteiger reveled in the opportunity to make millions in a downtrodden league where they could enjoy the spoils of American life without much responsibility. They were awarded lives of relative anonymity, a foreign concept to European soccer players. As the MLS became connotated with its aging stars, commissioner Don Garber knew a change was required.
In 2018, Garber came out and said, “we need to become more of a selling league” (Reuters). Consequently, rules were passed to further incentivize clubs to sell. MLS clubs invested heavily in scouting, player development, and transfer fees. Instead of the Pirlos and Lampards, clubs purchased promising talents with hopes of increasing their transfer values with MLS marketing and development.
As players continue through the MLS pipeline and carve out careers in Europe, the league will increase its brand value.
Currently, clubs derive most of their revenue from ticket sales and sponsorships. To sustain their high valuations, they are focusing their efforts on maximizing broadcasting rights. The MLS’ current deal with “ESPN, Fox, and Univision expires after the 2022 season.”2 The new TV deal is expected to yield an annual fee in the region of “$150 million to $200 million.”3
Additionally, the high franchise valuations have been propped up by the absence of promotion/relegation. In Europe, there is an inherent risk that a poor season could result in relegation. As chronicled in my deep dive on Burnley, the differences in broadcasting revenue between leagues can have dire impacts on a club. Therefore, purchasing a team in the MLS is viewed as a much safer investment. An owner is guaranteed MLS-level broadcasting revenues regardless of on-field performance, insulating owners from a sudden downturn ruining their ROI.
Still, MLS clubs are trading at “12 times revenue, almost double the multiple in NFL (6.2) and MLB (6.4) and greater than the booming NBA (7.8).”4 Those high multiples result from MLS owner’s equity stake in Soccer United Marketing (SUM). SUM handles the MLS’ television and marketing interests plus the commercial rights of the USSF and CONCACAF. According to Forbes, SUM is worth around “$2bn, with annual revenues of $350m,” with some clubs deriving “more than 40% of their value from those holdings alone.”5
SUM is quite valuable to owners of the MLS. Unfortunately, its bargaining power has lessened as the United States Soccer Federation (USSF) announced that they will be handling their broadcasting rights internally in the future. Previously, SUM approached prospective broadcasting partners to negotiate an entire package of USMNT, USWMNT, MLS, and CONCACAF matches for a singular fee.6 As half of the compensation is devoted to the national teams, it remains unclear if SUM can sustain its bargaining power in the upcoming negotiations. As stated by Sportico, “MLS has pushed the idea of a $400 million deal in recent years, but that is out the window without the national team.”7
With teams receiving a substantial portion of their valuation from SUM, the upcoming broadcasting deal will illuminate whether the MLS has enough viewership appetite to sustain their lofty valuations. To new owners like David Tepper, an expansion fee of $350 million is betting that the MLS can carve a sizeable niche in the American market. In a bullish scenario, hosting the 2026 World Cup could result in the MLS surpassing the NHL and MLB in domestic popularity. In closing, the current price for MLS franchises is wildly inflated but could reward owners immensely if the league supplants the NHL and MLB.
What I’m Watching This Week
Monday
Nets vs Bulls at 8:00 PM on NBA TV
Bears vs Steelers at 8:15 PM on ESPN
Hornets vs Lakers at 10:00 PM on NBA TV
Tuesday
Bucks vs 76ers at 7:30 PM on TNT
Trail Blazers vs Clippers at 10:00 PM on TNT
Wednesday
Heat vs Lakers at 10:00 PM on ESPN
Thursday
Greece vs Spain at 2:45 PM on ESPN+
Raptors vs 76ers at 7:00 PM on NBA TV
Ravens vs Dolphins at 8:20 PM on FOX
Heat vs Clippers at 10:30 PM on NBA TV
Friday
Italy vs Switzerland at 2:45 PM on ESPN+
USMNT vs Mexico at 4:00 PM on FOX
Bucks vs Celtics at 7:30 PM on ESPN
Bulls vs Warriors at 10:00 PM on ESPN
Saturday
Mississippi State vs Auburn at 12:00 PM on ESPN
Oklahoma vs Baylor at 12:00 PM on FOX
Heat vs Jazz at 5:00 PM on NBA TV
Texas A&M vs Ole Miss at 7:00 PM on ESPN
Sunday
Falcons vs Cowboys at 1:00 PM on FOX **
Browns vs Patriots at 1:00 PM on CBS **
Saints vs Titans at 1:00 PM on CBS **
Portugal vs Serbia at 2:45 PM on ESPN+
Spain vs Sweden at 2:45 PM on ESPN+
Panthers vs Cardinals at 4:05 PM on FOX **
Vikings vs Chargers at 4:05 on FOX **
Seahawks vs Packers at 4:25 on CBS **
Chiefs vs Raiders at 8:20 PM on NBC
** = Check Local Listings
All times EST
What I’m Reading
Sports
Explained: Manchester United, the Glazers and £660m of debt ***
Ja’Marr Chase, Trevon Moehrig, Mac Jones and more: NFL Midseason All-Rookie team **
Kyler Murray, Cooper Kupp, T.J. Watt and more: NFL Midseason All-Pro team **
From Kyler Murray and Myles Garrett to Ja’Marr Chase, our midseason NFL award winners **
What makes Bills GM Brandon Beane the NFL’s top executive at midseason *
Cristiano Ronaldo is not a Europa League player *
The life of NFL free agents during the season: ‘You have to be ready’ *
Lloyd: Browns’ Odell Beckham Jr. has always been running up the bill but never paying the check *
How Cincinnati Bengals WR Ja’Marr Chase became our NFL top rookie at midseason *
Person: The Panthers are stuck in reverse with Sam Darnold, with no help in sight this season *
‘You either improve or you die’ – What it’s like to play for Antonio Conte ***
NFL Week 9 takeaways: Jags’ win over Bills is surprise of season, Cardinals impress *
Rosenstein: Justin Gaethje is the most exciting fighter in the world, plus other UFC 268 thoughts *
How Tyler Boyd became the heart of the Cincinnati Bengals **
Business
Sequoia borrows Wall Street’s playbook in chase for ‘permanent capital’ **
SoftBank’s $100 Billion Fund for Startups Pays Too Little to Retain Top Talent *
Shiba Wallet With Billions Is Scrutinized as Coin Tumbles *
Investors take aim at private equity’s use of private jets *
How private equity came to resemble the sprawling empires it once broke up ***
A Nu Dawn, A Nu Day: Inside Brazil’s Newest Big Bank **
Hackers Apologize to Arab Royal Families for Leaking Their Data *
*** Must Read
** Very Good
* Recommended
https://www.sportico.com/valuations/teams/2021/mls-team-valuations-2021-1234634303/
https://www.sportico.com/valuations/teams/2021/mls-team-valuations-2021-1234634303/
https://www.sportico.com/valuations/teams/2021/mls-team-valuations-2021-1234634303/
https://www.sportico.com/valuations/teams/2021/mls-team-valuations-2021-1234634303/